jeremybirch you win the prize, this whole science experiment could have been summarized in a few paragraphs as a waste of time.
I assume someone was being paid by a arm of the government to perform this demonstration, and throw away way our money. One other technical comment the aero drag caused by the heat exchanger (i.e TEG) most likely wasted significantly more energy than the TEG captured, making net energy captured negative.
How about capturing the heat and use it in a closed loop vapor cycle engine (i.e. similar to air conditioner in reverse, you will get much higher efficiency than 5%)

while its possible to attain good temperature differential in such a system for a therocouple but i think that a high efficiency solar cell fitted to utilize the wing span (without destroying the aerodynamic) can be a much less cumbersome and more efficient option.

I am curious what the NET power output difference is between the untouched 2-stroke motor and the one with exhaust mod... Generally, cooling off exhaust, especially of a motor with very specific exhaust parameters, will change the powerband.
Speaking of motors, why no 4-stroke?

When I was nine I connected a motor's shaft to a generator and wired the generator's output to the motor.
With great anticipation and excitement, I wrapped a rope around the shafts and gave it a good tug.
While the shaft rotated a little longer with the wires connected than without, I clearly didn't have the perpetual motion machine I had imagined.
Some years later I learned why.

I've had an interest in this approach to energy harvesting for years but Peltier devices are particularly difficult to deal with from a design standpoint (not to mention a little pricey and very inefficient).
I'm happy to read of this research. I expect higher temperature devices may come out of it, which would expand the potential applications of these interesting devices.

This system is trying to generate electricity from waste heat in the engine exhaust - not from the force of the "air" flow in the exhaust.
The system was originally only 20% efficient meaning 80% was lost as heat, and some fraction of that is in the exhaust, say 30% of the overall energy. This system can capture 5% of that ie 5% of 30% which is only 1.5% of the total energy in the fuel. So at best this raises the thermal efficiency to 21.5%. As the heatsinks etc weigh quite a lot this in itself might increase the fuel consumed. I am not convinced at this level of energy extraction that it has much merit over having a generator linked to the shaft.
Presumably these are TEG's are using the Peltier effect? There may be much more efficient ways to extract energy eg using Sterling engines etc